Montana: The Lone Star in the MSB Regulatory Sky
Money Services Businesses (MSBs) in the United States are generally subject to various federal and state regulations designed to prevent money laundering, fraud, and other illegal financial activities.The MSB landscape is often characterized by stringent licensing requirements that encompass money transmitters, check cashers, currency (including crypto) dealers or exchangers, and issuers of traveler’s checks, money orders, or stored value cards. However, there is one state that stands apart from this norm: Montana.
Montana is unique in that it doesn’t require MSBs to obtain a state license to operate, marking it as an outlier in an otherwise uniformly regulated national landscape. But this does not mean that a Montana MSB is unregulated. Here we delve into Montana’s unusual stance and its implications.
The Financial Crimes Enforcement Network (FinCEN), a bureau of the U.S. Department of the Treasury, is responsible for enforcing federal regulations for MSBs. This includes the requirement that these businesses register with FinCEN and comply with anti-money laundering (AML) policies as per the US Bank Secrecy Act (BSA). While federal regulation provides a baseline, most states supplement this with additional rules and licensing requirements on the state level. This is where Montana diverges from the path. The state has chosen not to impose additional licensing requirements on MSBs, making it the only state in the U.S. to do so.
Reasons for Montana’s Exceptional Stance
While there is limited official documentation explaining why Montana has chosen not to enact state-level MSB licensing requirements, several factors may contribute to this:
Low Population Density: Montana has a relatively low population, and its rural nature may mean fewer complexities in money services operations.
Administrative Simplicity: The absence of a state licensing requirement cuts down administrative burdens for both the state and MSBs registered there.
Business Incentive: Easier regulatory requirements could attract more MSBs to operate in Montana, although operating in other US states would mean the MSB would have to obtain state licenses there. International operators are increasinly chosing to incorporate MSBs in Montana for global online operations, often in the fields of cryptocurrencies and payment services. Such services are typically offered online only without targeting any specific country/jurisdiction and thus not typically triggering regulatory requirements anywhere else.
- For MSBs: Ease of Entry: Lower barriers to entry can encourage new MSBs to set up shop in Montana including foreign owned MSBs operating outside the US.
- Reduced Operational Costs: Businesses can potentially save on licensing fees, legal costs, and time spent on compliance.
- Risk of Non-Uniform Practices: Without state oversight, there may be a risk of non-uniform practices and policies among MSBs.
- For Consumers: Increased Access: The potential for more MSBs could mean more options for consumers.
- Lower Fees: Competition and lower operational costs for MSBs may lead to lower fees for services.
- Caution Required: The lack of state oversight could mean a higher risk of fraud or other issues, although federal regulations still apply.
Montana’s status as the only state in the U.S. without MSB licensing requirements is a subject of interest for both regulators and the MSB industry. While it offers unique advantages for businesses and possibly consumers, the approach raises questions about the effectiveness of state-level regulation. As MSBs continue to evolve with the growing complexities of financial technologies, Montana’s stance provides a fascinating case study for policymakers, entrepreneurs, and consumers alike. For further information about Montana MSBs and how they are often used internationally, please see www.montanamsb.com.